CAPITAL RESERVE STUDY

Transcription

1 Arizona Texas Nevada Utah New Mexico CAPITAL RESERVE STUDY Prepared for: Quail Creek HOA Date of Report: 6/7/2018 Capital Reserve Analysts Bringing the future into the present Capital Reserve Analysts, LLC 1

2 Table of Contents DISCLOSURE AND LIMITATIONS... 3 REPORT GUIDE... 4 PROJECT OVERVIEW... 5 FINANCIAL OVERVIEW... 6 Reserve Fund Status... 6 Recommended Funding YEAR CASH FLOW SUMMARY... 7 INTRODUCTION AND METHODOLOGY... 8 Introduction and Purpose... 8 Physical Evaluation/Assessment... 9 Financial Analysis FINANCIAL ANALYSIS Projected Reserve Expenses: Reserve Fund Status: Funding Alternatives: DATA TABLES APPENDIX SUPPLEMENTAL DISCLOSURES DEFINITIONS PHOTOGRAPHIC INVENTORY Capital Reserve Analysts, LLC 2

3 Disclosure and Limitations Forward Looking Statements: Because we have no control over future events, we cannot claim that all the events we anticipate will occur as planned. We expect that inflationary trends will continue, and we expect that financial institutions will provide interest earnings on funds on deposit. We believe that reasonable estimates for these figures are much more accurate than ignoring these economic realities. The things we can control are measurements, which we attempt to establish within 5% accuracy. Your starting Reserve Balance and current Reserve interest earnings are also numbers that can be identified with a high degree of certainty. These figures have been provided to us, and were not confirmed by our independent research. Our projections assume a stable economic environment and lack of natural disasters. Because both the physical status and financial status of the association change each year, this is by nature a one year document. This information can and should be adjusted annually as part of the Update process so that more accurate estimates can be reflected in the Reserve plan. Future Updates: Reality often differs from even the best assumptions due to changing economic factors, physical factors, or ownership expectations. Because many years of financial preparation help the preparation for large expenses, this Report shows expenses for the next 30 years. We fully expect a number of adjustments will be necessary through the interim years to both the cost and timing of distant expense projections. It is our recommendation and that of the American Institute of Certified Public Accountants (AICPA) that your be updated annually. We have relied upon the client to provide the current (or projected) Reserve Balance, the estimated net after tax current rate of interest earnings, and to indicate if those earnings accrue to the Reserve Fund. In addition, we have considered the association s representation of current and historical Reserve projects reliable, and we have considered the representations made by its vendors and suppliers to also be accurate and reliable. Limited Scope: Component quantities indicated in this Report were developed by Capital Reserves unless otherwise noted in our Site Inspection Notes comments. No destructive or intrusive testing was performed, nor should the site inspection be assumed to be anything other than for budget purposes. Capital Reserve Analysts, LLC 3

4 Report Guide This report is a budgeting tool designed to help you navigate the uncertain future and contains findings of the current Reserve Fund Status and a recommendation for an appropriate Reserve contribution rate in order to adequately plan for ongoing major maintenance, repair and replacement of common area elements. Our recommendations are just that, recommendations and do not include all possible funding scenarios. This report is divided into the following sections: Project and Financial Overview: this section provides an overview of the project and outlines our findings and recommendations. This section of the report should be used as a quick reference in helping the reader to understand the parameters and results of the study. Introduction and Methodology: Details the framework, methods, and materials used in developing this report. Financial Analysis: This section contains the current reserve fund strength and our recommended funding plan. Data Tables Appendix: This section includes detailed tables outlining projected expenses, funding requirements and reserve balance calculations. Physical Evaluation/Maintenance Recommendations: This section includes detailed tables outlining projected expenses, funding requirements and reserve balance calculations. Provides in depth, detailed condition assessments along with maintenance recommendations. If you have questions about this, please contact us. We look forward to doing business with you in the future. Thank you, Capital Reserve Analysts, Prepared by: Capital Reserve Analysts, LLC 4

5 Project Overview Association Name Quail Creek HOA Location Apache Junction, Arizona Year Constructed 1/1/1989 Project Description Condominiums Scope of Work Level I Funding Strategy Recommended Full Funding Number of Units 151 Date Prepared 6/7/2018 Next Study 2019 Project Summary Report Period 1/1/ /31/2049 Inflation Rate (30 Yr. Avg.) 3% Interest Rate (30 Yr. Avg.).15% Starting Reserve Balance $130,809 Fully Funded Balance $733,139 Percent Funded 18% *Projected starting Reserve Balance provided by client. This figure is not audited. Capital Reserve Analysts, LLC 5

6 Financial Overview This section is made up of a finding of the client s current Reserve Fund Status (measured in cash and Percent Funded) and a recommendation for an appropriate Reserve contribution rate (Funding Plan) in order to adequately plan for the ongoing major maintenance, repair and replacement of common area elements. Reserve Fund Status The adequacy of current reserves is determined by comparing what you have (current reserves) to the ideal amount of reserves (the Fully Funded Balance). This is done by dividing current reserves by the Fully Funded Balance (what you should have) and expressing as a percentage. The Percent Funded Level is a metric developed by the CAI (Community Association Institute) to determine a Reserve Fund's strength. Your Reserve Fund is 18% Funded, this represents a Weak financial position. For comparison, clients with a percent funded level of 70% and above have a low risk for special assessments conversely, clients with a percent funded level of 30% and below have a high risk of special assessments and deferred maintenance. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120% WEAK FAIR STRONG SURPLUS Recommended Funding Regular annual increases to reserve contributions are needed to help offset inflation. (See Inflation & Interest assumptions herein) Based on your starting reserve balance and projected reserve expenses, we recommend annual reserve contributions of $93,600. Annual Monthly Per Unit Per Month Regular Assessments $405,060 $33,755 $224 Current Reserve Contributions $56,770 $4,731 $31 Recommended Reserve Contributions $93,600 $7,800 $52 Capital Reserve Analysts, LLC 6

7 5 Year Cash Flow Summary The table below identifies systems or components which are expected to have a remaining useful life of less than five (5) years, which are found to be in need of attention, which must be modified, repaired or replaced in order to maintain or preserve the useful life of the asset, or which are otherwise in a state of deferred maintenance. Fiscal Year Starting Reserve Balance $130,809 $207,993 $240,775 $340,511 Annual Reserve Contribution $93,600 $96,408 $99,300 $102,279 Special Assessment $0 $0 $0 $0 Interest Earnings $254 $337 $436 $494 Total Income $224,663 $304,738 $340,511 $443,284 Total Expenses $16,670 $63,963 $0 $124,821 Ending Reserve Balance: $207,993 $240,775 $340,511 $318,463 Item # Reserve Asset Asphalt Pavement Seal Coat, Repairs $0 $0 $0 $13,090 $0 7 Monument Sign Refurbish $0 $0 $0 $0 $2,814 8 Mailbox Clusters Replace $0 $0 $0 $0 $24, Maintenance Golf Cart Replace $0 $4,120 $0 $0 $0 19 Laundry Cabinetry Replace $0 $3,296 $0 $0 $0 20 Restroom Remodel $0 $3,090 $0 $0 $0 21 HVAC Unit Replace $0 $0 $0 $0 $4, Globe Lights Replace $0 $0 $0 $1,311 $0 24 Spa Surface Resurface $0 $0 $0 $3,934 $0 26 Pool "Kool" Deck Seal, Clean, Repair $2,320 $0 $0 $0 $2, Pool Furniture Replace (Lounges + Chairs) $0 $0 $0 $0 $6, Pool Heater Replace (A) $2,500 $0 $0 $0 $0 30 Pool Heater Replace (B) $0 $0 $0 $2,732 $0 31 Spa Heater Replace $0 $2,369 $0 $0 $0 32 Pool Filter Replace $0 $0 $0 $0 $1, Spa Filter Replace $0 $1,133 $0 $0 $0 34 Surveillance System Replace $0 $5,665 $0 $0 $0 38 Stucco/Block Surfaces Repaint $0 $0 $0 $103,754 $0 39 Wood Surfaces Repaint $11,850 $0 $0 $0 $13, Metal Surfaces Repaint $0 $13,390 $0 $0 $0 44 Hot Water Boilers Replace (Bldgs. 4, 5, 8, 9) $0 $30,900 $0 $0 $0 Grand Total $16,670 $63,963 $0 $124,821 $55,229 Capital Reserve Analysts, LLC 7

8 Introduction and Methodology Introduction and Purpose Every property owner can benefit from a. A specifically benefits projects owned or maintained by Common Interest Associations. The Board of Directors or governing body of common interest entities has a fiduciary responsibility to maintain and preserve the value of assets belonging to the community. As part of this fiduciary duty, board members are responsible for the long term planning and funding of large scale maintenance or renovation projects such as; building remodeling, retrofit of the fire alarm system and resurfacing of private streets. A prepared by an independent, certified consultant will provide specific recommendations regarding the appropriate amount of Reserve Contributions to ensure that funds for major repairs and replacements will be available when needed. Key benefits include: Protect and preserve property values by maintaining physical assets with timely repair/replacement of common elements. Fairness: With the help of a, dues/assessments can be set to ensure both current and future owners pay for the use and enjoyment of amenities. Reduce the probability of large or sudden assessments. A is made up of two parts: 1) The Physical Evaluation/Assessment is the information about the physical status and repair/ replacement cost of the major common area components. This section is comprised of the Component Inventory, Condition Assessment, and Life and Valuation Estimates. Condition Assessments and Life and Valuation Estimates will change as time elapses; therefore, these should be updated on an annual basis. 2) The Financial Analysis is the evaluation and analysis of the Reserve balance, income, and expenses. The Financial Analysis is made up of a finding of the client s current Reserve Fund Status (measured in cash or as Percent Funded) and a recommendation for an appropriate Reserve contribution rate (Funding Plan). A Reserve Funding Plan typically takes the form of a budget recommendation for a monthly Reserve contribution rate." Capital Reserve Analysts, LLC 8

9 Physical Evaluation/Assessment The Physical Analysis is the first and most important step in developing a because the data and assessments gathered during this phase forms the baseline or foundation of this report. The Physical Analysis contains the following estimates/projections: Site Inspection: This phase begins with a project engineer performing the property inspection to record, measure and assess the current condition of each common element/component. As part of the on site inspection, the project engineer takes photos to document the condition of the common elements." Reserve Component Criteria: Reserve Components should be major, predictable expenses. It is incorrect to include lifetime components, unpredictable expenses (such as insurance related losses), and expenses more appropriately handled from the operational budget. Capital Reserve Analysts utilizes CAI s national standard four part test as a guideline to determine reserve components. Part 1: Item must be a common area maintenance responsibility per the accepted governing documents. Part 2: the component must have a predictable useful life. Typically, items that do not have a predictable useful life include: Electrical Wiring, Underground Utilities and Building Structures. Part 3: the item's life expectancy falls within the projection period. Components with a life expectancy beyond the report time frame (typically 30 years) will not be included under normal circumstances. Part 4: the repair or replacement cost must be above a minimum threshold cost. Minor repairs usually under $1,000 should be funded with Operating funds in order to minimize clutter in the Reserve Component list. Assumptions/Notes: It should be noted that the projections made in this study are just that, projections and do not predict with 100% surety the future. We do however, use well defined methodologies and extensive research is done in preparation of each. Capital Reserve Analysts, LLC 9

10 Component Useful Life (UL): Component Useful Life is the estimated time, in years, that a reserve component can be expected to serve its intended function if properly constructed and maintained. Useful Life is a prediction based on accurate historical records if provided, exposure to the elements, initial quality and installation, extent of use, and the amount of preventative maintenance exercised. In addition to the above listed factors, the following sources are used to determine Reserve Component Useful Life: 1) Visual Inspection (observed wear and age) 2) Proprietary Cost Database of experience and similar projects 3) Historical component data (client maintenance records) 4) Vendor/Manufacturers' Expertise and Recommendations Remaining Useful Life (RUL): The estimated time, in years, that a reserve component can be expected to continue to serve its intended function. Projects anticipated to occur in the initial year of this report have zero Remaining Useful Life. Intuitively, the RUL of a component should equal the UL (Useful Life) less its chronological age. However, this is not the "real world" reality. To accurately estimate the remaining useful life of a component, the following factors should to be considered: Chronological age (number of years in service) Observed physical condition at the time of inspection Extent of utilization compared to design specifications Historical and current levels of preventative maintenance Exposure to elements Quality and design of materials Installation method compared to manufacturer's specifications Assumptions/Notes: It is important to note that we may recommend future replacement based factors other than normal wear and tear. For example, interior finishes and fixtures may have a functional Useful Life of years, however remodeling or updating interior elements will most likely take place at the year mark for aesthetic purposes. Another example of recommended replacement before the end of a component's UL would be technology components. Obsolescence and advancements in technology could accelerate the need for replacement of computers, security equipment, electrical components etc. Capital Reserve Analysts, LLC 10

11 Financial Analysis The data compiled during the physical analysis is the baseline for the Financial Analysis and resulting recommendations. This is because the physical analysis details what you are reserving for and when future expenditures can be expected. The Financial Analysis contains the following key results: 1) Reserve Fund Strength or Percent Funded Level: The adequacy of current reserves is determined by comparing what you have (current reserves) to the ideal amount of reserves (the Fully Funded Balance). This is done by dividing current reserves by the Fully Funded Balance (what you should have) and expressing as a percentage. The Percent Funded Level is a metric developed by the CAI (Community Association Institute) to determine a Reserve Fund's strength. 0% 30% WEAK Percent Funded 30% 70% FAIR 70% 100% STRONG 105% + SURPLUS 2) Fully Funded Balance (FFB): This concept is best illustrated by the following example: Assume XYZ Association has (2) reserve items: a 1 year old roof and a 5 year old pool. Assume a useful life of 20 years for the roof and a current replacement cost estimate of $50,000. For the pool, assume a useful life of 10 years for resurfacing at a current cost estimate of $20,000. The roof has used up (1) year of the 20 year useful life or 1/20th of $50,000 = $2,500. The pool has used up (5) years of the 10 year useful life or 5/10ths of $20,000 = $10,000. XYZ's Fully Funded Balance is the total deterioration since the last time the roof was replaced and the last time the pool was resurfaced. The FFB is calculated as $2,500 + $10,000 = $12,500. Capital Reserve Analysts, LLC 11

12 3) Reserve Component Cost Estimates: We determine cost estimates in the following order: Actual client historical records Internal database of similar projects Local vendor/contractor recommendations National cost estimating databases (R S Means, Marshall Swift etc.) 4) Recommended Reserve Contribution or Funding Plan: The recommended funding plan is designed to provide sufficient reserves to fund future expenses in a timely manner. We utilize four funding principles in establishing our recommended Reserve Contributions: 1. Ensuring that the client has sufficient funds to perform current reserve projects on time. 2. Put in place a stable contribution rate over the 30 years. 3. Evenly distributed contributions over the years. (Prepare now with manageable monthly contributions rather than face unmanageable expenses in the future) 4. Assist board members and officials in doing their fiduciary duty to guide the entity s future. Full Funding Maintains the Reserve Fund at a level equal to the physical deterioration that has occurred is called Full Funding (100% Funded). As each asset ages and becomes used up, the Reserve Fund grows proportionally. We have utilized the Full Funding approach for this Replacement Threshold Funding Is the title of all other objectives randomly selected between Baseline Funding and Full Funding. Baseline Funding Allows the Reserves to fall close to zero, but not below zero. In these instances, deterioration occurs without matching Reserve contributions. With a low Percent Funded, emergency Capital Reserve Analysts, LLC 12

13 Financial Analysis Economic Assumptions: Future expense projections are calculated by applying an inflation factor to current cost estimates for each component. Inflation factors are applied to reserve components in 5 year increments. Future reserve fund balances include interest earnings based on the table below. *Inflation Assumptions Interest Earnings (Net after tax) Inflation (Yrs. 1 5) 3.00% Interest (Yrs. 1 5) 0.15% Inflation (Yrs. 6 10) 3.00% Interest (Yrs. 6 10) 0.15% Inflation (Yrs ) 3.00% Interest (Yrs ) 0.15% Inflation (Yrs ) 3.00% Interest (Yrs ) 0.15% Inflation (Yrs ) 3.00% Interest (Yrs ) 0.15% Inflation (Yrs ) 3.00% Interest (Yrs ) 0.15% *Inflation rates are based on the average increase of the Consumer Price Index (CPI) over the last 30 years as published by the Bureau of Labor Statistics ( Projected Reserve Expenses: This analysis is based on a 30 year time horizon. Although we use well defined methodologies to project into the future, it is impossible to predict with 100% certainty future conditions. Focus should be on near term projections (Years 1 5) in this report. Annual updates to this report are recommended to account for changes in association plans, cost estimates and economic conditions. $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Reserve Expenses by Year Capital Reserve Analysts, LLC 13

14 Reserve Fund Status: How much should we have in Reserves? The answer to this question depends on several factors; age, size and quantity are just a few of these factors. CAI and NRSS measure Reserve Fund strength by the ratio of current funds to the "Ideal" amount of funds or FFB. Percent Funded = Starting Reserve Balance Fully Funded Balance 3 18% = 1 $130,809 2 $733, The starting reserve balance is as of the beginning date of this analysis and is provided by the client. This figure is not audited. 2. Your Fully Funded Balance is the sum of all the individual components' FFB (see TABLE #5). The FFB number is as of the start of this analysis. 3. Based on your starting reserve balance and the calculated fully funded balance your reserves are 18% funded. Funding Alternatives: Reserve contributions should be set at a stable level in order to match annual deterioration and keep up with inflation; this level generally falls around 3 5% annual increases. Annual Monthly Per Unit Per Month Current Reserve Contributions $56,770 $4,731 $31.33 Full Funding (Recommended) $93,600 $7,800 $51.66 Threshold Funding $90,000 $7,500 $49.67 Baseline Funding $87,600 $7,300 $48.34 Capital Reserve Analysts, LLC 14

15 Reserve Contributions: $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Reserve Contributions Baseline Funding Goal 100% Funding Goal Current Funding Percent Funded: Percent Funding Levels 100% Funding Goal Threshold Funding Baseline Funding Goal 120% 100% 80% 60% 40% 20% 0% Capital Reserve Analysts, LLC 15

16 Data Tables Appendix TABLE 1 is a 30 year income/expense summary showing percent funding levels based with a "Full Funding" objective. TABLE 2 is a 30 year income/expense summary showing percent funding levels based with a "Threshold Funding" objective. TABLE 3 is a 30 year income/expense summary showing percent funding levels based with a "Baseline Funding" objective. TABLE 4 is a detailed listing of your Reserve Components. This table is the baseline and driver of our recommendations. TABLE 5 shows the significance or impact each component has on the Fully Funded Balance and ultimately the Reserve contribution rate. TABLES 6 8 show detailed annual expense projections for each component for all 30 years. Capital Reserve Analysts, LLC 16

17 Table 1 30 Year Summary Full Funding 100% Funding Goal Fully Starting Funded Percent Reserve Reserve Special Ending Year Balance Balance Funded Status Contribution Assessment Interest Expenses Balance 2019 $130,809 $733,139 18% Weak $93,600 $0 $254 $16,670 $207, $207,993 $797,608 26% Weak $96,408 $0 $337 $63,963 $240, $240,775 $817,090 29% Weak $99,300 $0 $436 $0 $340, $340,511 $904,880 38% Fair $102,279 $0 $494 $124,821 $318, $318,463 $865,267 37% Fair $105,348 $0 $516 $55,229 $369, $369,098 $897,999 41% Fair $108,508 $0 $417 $291,499 $186, $186,523 $693,840 27% Weak $111,763 $0 $352 $15,523 $283, $283,116 $769,887 37% Fair $115,116 $0 $455 $75,674 $323, $323,013 $788,396 41% Fair $118,570 $0 $305 $358,331 $83, $83,557 $518,524 16% Weak $122,127 $0 $154 $84,055 $121, $121,782 $525,327 23% Weak $125,791 $0 $258 $25,534 $222, $222,296 $594,945 37% Fair $128,306 $0 $414 $21,456 $329, $329,561 $673,257 49% Fair $130,873 $0 $572 $28,330 $432, $432,675 $749,316 58% Fair $133,490 $0 $609 $188,015 $378, $378,759 $665,731 57% Fair $136,160 $0 $465 $274,270 $241, $241,113 $493,424 49% Fair $138,883 $0 $465 $1,558 $378, $378,903 $599,548 63% Fair $141,661 $0 $633 $55,796 $465, $465,401 $655,779 71% Strong $144,494 $0 $702 $140,258 $470, $470,338 $629,571 75% Strong $147,384 $0 $817 $0 $618, $618,539 $750,001 82% Strong $150,331 $0 $1,017 $32,256 $737, $737,631 $843,866 87% Strong $153,338 $0 $1,195 $35,887 $856, $856,277 $939,945 91% Strong $156,405 $0 $1,321 $108,230 $905, $905,773 $967,624 94% Strong $159,533 $0 $1,479 $0 $1,066, $1,066,786 $1,110,940 96% Strong $162,724 $0 $1,577 $194,497 $1,036, $1,036,590 $1,061,652 98% Strong $165,978 $0 $1,651 $38,969 $1,165, $1,165,250 $1,174,611 99% Strong $169,298 $0 $1,827 $65,701 $1,270, $1,270,674 $1,267, % Strong $172,684 $0 $2,011 $34,505 $1,410, $1,410,863 $1,398, % Strong $176,137 $0 $2,144 $141,673 $1,447, $1,447,471 $1,426, % Strong $179,660 $0 $2,273 $45,461 $1,583, $1,583,943 $1,559, % Strong $183,253 $0 $2,416 $131,553 $1,638,060 Capital Reserve Analysts, LLC 17

18 Table 2 30 Year Summary Threshold Funding Threshold Funding Fully Starting Funded Percent Reserve Reserve Special Ending Year Balance Balance Funded Status Contribution Assessment Interest Expenses Balance 2019 $130,809 $733,139 18% Weak $90,000 $0 $251 $16,670 $204, $204,391 $797,608 26% Weak $92,700 $0 $328 $63,963 $233, $233,456 $817,090 29% Weak $95,481 $0 $422 $0 $329, $329,359 $904,880 36% Fair $98,345 $0 $475 $124,821 $303, $303,358 $865,267 35% Fair $101,296 $0 $490 $55,229 $349, $349,915 $897,999 39% Fair $104,335 $0 $385 $291,499 $163, $163,135 $693,840 24% Weak $107,465 $0 $314 $15,523 $255, $255,391 $769,887 33% Fair $110,689 $0 $410 $75,674 $290, $290,815 $788,396 37% Fair $114,009 $0 $253 $358,331 $46, $46,747 $518,524 9% Weak $117,430 $0 $95 $84,055 $80, $80,216 $525,327 15% Weak $120,952 $0 $192 $25,534 $175, $175,826 $594,945 30% Weak $123,372 $0 $340 $21,456 $278, $278,082 $673,257 41% Fair $125,839 $0 $491 $28,330 $376, $376,082 $749,316 50% Fair $128,356 $0 $520 $188,015 $316, $316,943 $665,731 48% Fair $130,923 $0 $368 $274,270 $173, $173,963 $493,424 35% Fair $133,541 $0 $360 $1,558 $306, $306,307 $599,548 51% Fair $136,212 $0 $520 $55,796 $387, $387,243 $655,779 59% Fair $138,936 $0 $580 $140,258 $386, $386,502 $629,571 61% Fair $141,715 $0 $687 $0 $528, $528,904 $750,001 71% Strong $144,549 $0 $878 $32,256 $642, $642,075 $843,866 76% Strong $147,440 $0 $1,047 $35,887 $754, $754,676 $939,945 80% Strong $150,389 $0 $1,164 $108,230 $797, $797,999 $967,624 82% Strong $153,397 $0 $1,313 $0 $952, $952,709 $1,110,940 86% Strong $156,465 $0 $1,402 $194,497 $916, $916,079 $1,061,652 86% Strong $159,594 $0 $1,466 $38,969 $1,038, $1,038,170 $1,174,611 88% Strong $162,786 $0 $1,631 $65,701 $1,136, $1,136,887 $1,267,063 90% Strong $166,042 $0 $1,805 $34,505 $1,270, $1,270,228 $1,398,165 91% Strong $169,363 $0 $1,927 $141,673 $1,299, $1,299,846 $1,426,677 91% Strong $172,750 $0 $2,047 $45,461 $1,429, $1,429,181 $1,559,117 92% Strong $176,205 $0 $2,179 $131,553 $1,476,012 Capital Reserve Analysts, LLC 18

19 Table 3 30 Year Summary Baseline Funding Baseline Funding Goal Fully Starting Funded Percent Reserve Reserve Special Ending Year Balance Balance Funded Status Contribution Assessment Interest Expenses Balance 2019 $130,809 $733,139 18% Weak $87,600 $0 $250 $16,670 $201, $201,989 $797,608 25% Weak $90,228 $0 $323 $63,963 $228, $228,577 $817,090 28% Weak $92,935 $0 $413 $0 $321, $321,924 $904,880 36% Fair $95,723 $0 $461 $124,821 $293, $293,287 $865,267 34% Fair $98,595 $0 $473 $55,229 $337, $337,126 $897,999 38% Fair $101,552 $0 $363 $291,499 $147, $147,543 $693,840 21% Weak $104,599 $0 $288 $15,523 $236, $236,907 $769,887 31% Fair $107,737 $0 $380 $75,674 $269, $269,350 $788,396 34% Fair $110,969 $0 $219 $358,331 $22, $22,207 $518,524 4% Weak $114,298 $0 $56 $84,055 $52, $52,505 $525,327 10% Weak $117,727 $0 $148 $25,534 $144, $144,846 $594,945 24% Weak $120,082 $0 $291 $21,456 $243, $243,764 $673,257 36% Fair $122,483 $0 $437 $28,330 $338, $338,353 $749,316 45% Fair $124,933 $0 $461 $188,015 $275, $275,732 $665,731 41% Fair $127,432 $0 $304 $274,270 $129, $129,197 $493,424 26% Weak $129,980 $0 $290 $1,558 $257, $257,909 $599,548 43% Fair $132,580 $0 $445 $55,796 $335, $335,138 $655,779 51% Fair $135,231 $0 $499 $140,258 $330, $330,611 $629,571 53% Fair $137,936 $0 $600 $0 $469, $469,147 $750,001 63% Fair $140,695 $0 $786 $32,256 $578, $578,371 $843,866 69% Fair $143,509 $0 $949 $35,887 $686, $686,941 $939,945 73% Strong $146,379 $0 $1,060 $108,230 $726, $726,150 $967,624 75% Strong $149,306 $0 $1,202 $0 $876, $876,658 $1,110,940 79% Strong $152,293 $0 $1,284 $194,497 $835, $835,738 $1,061,652 79% Strong $155,338 $0 $1,342 $38,969 $953, $953,450 $1,174,611 81% Strong $158,445 $0 $1,501 $65,701 $1,047, $1,047,695 $1,267,063 83% Strong $161,614 $0 $1,668 $34,505 $1,176, $1,176,472 $1,398,165 84% Strong $164,846 $0 $1,783 $141,673 $1,201, $1,201,428 $1,426,677 84% Strong $168,143 $0 $1,895 $45,461 $1,326, $1,326,006 $1,559,117 85% Strong $171,506 $0 $2,020 $131,553 $1,367,980 Capital Reserve Analysts, LLC 19

20 Table 4 Reserve Component List ITEM # LOCATION RESERVE ASSET DESCRIPTION QTY UOM EL RUL CURRENT COST $/UNIT IN SVC YR REPL YR COMMON AREA/GROUNDS 1 Parking Areas and Drives Asphalt Pavement Resurface (Mill & Overlay) 133,100 SF 30 8 $266,200 $ Parking Areas and Drives Asphalt Pavement Seal Coat, Repairs 133,100 SF 4 3 $11,979 $ Sidewalks & Curbing Concrete Surfaces Repair/Replace (Allowance) 1 LS 12 7 $2,500 $2, Carport Structures Parking Awnings Repair/Replace (Allowance) 25,000 SF $6,000 $ Carport Structures Carport Structures Repaint 25,000 SF $12,500 $ Storage Parking Area Asphalt Pavement Resurface (Mill & Overlay) 3,500 SF $7,000 $ Community Entrance Monument Sign Refurbish 1 EA 20 4 $2,500 $2, Adj. Clubhouse Mailbox Clusters Replace 16 EA 30 4 $21,600 $1, Common Areas Pedestrian Bridges Replace 3 EA $12,000 $4, Common Areas Pedestrian Bridge Repair 3 EA 20 9 $3,000 $1, Common Area Maintenance Golf Cart Replace 1 EA 15 1 $4,000 $4, Landscaped Common Area Erosion/Drainage Repairs (Allowance) 1 LS $12,000 $12, Storage Building Flat Roof Inspect, Repair, Recoat 1,230 SF 10 7 $1,415 $ Landscaped Common Area Flat Roof Replace 1,230 SF 25 9 $3,998 $ CLUBHOUSE/POOL 15 Clubhouse Rooftop Flat Roof Inspect, Repair, Recoat 1,300 SF 10 7 $1,495 $ Clubhouse Rooftop Flat Roof Replace 1,300 SF $4,225 $ Clubhouse Rooftop Tile Roofs Refurbish 1,100 SF 35 5 $4,400 $ Clubhouse Flooring Clubhouse Flooring Resurface 1,500 SF 18 9 $2,250 $ Clubhouse Laundry Cabinetry Replace 1 LS 20 1 $3,200 $3, Clubhouse Restroom Remodel 1 LS 25 1 $3,000 $3, Clubhouse HVAC Unit Replace 1 EA 15 4 $3,800 $3, Pool Fence Globe Lights Replace 10 EA 30 3 $1,200 $ Pool Walls + Floor Pool Surface Resurface 105 LF 12 5 $11,550 $ Spa Walls + Floor Spa Surface Resurface 30 LF 10 3 $3,600 $ Pool Area Pool "Kool" Deck Resurface 2,320 SF 16 9 $11,600 $ Pool Area Pool "Kool" Deck Seal, Clean, Repair 2,320 SF 4 0 $2,320 $ Pool Area Pool Cover Replace 1 EA $1,000 $1, Capital Reserve Analysts, LLC 20

21 ITEM # LOCATION RESERVE ASSET DESCRIPTION QTY UOM EL RUL CURRENT COST $/UNIT IN SVC YR REPL YR 28 Pool Area Pool Furniture Replace (Lounges + Chairs) 30 EA 8 4 $5,700 $ Pool Equip. Area Pool Heater Replace (A) 1 EA 8 0 $2,500 $2, Pool Equip. Area Pool Heater Replace (B) 1 EA 8 3 $2,500 $2, Pool Equip. Area Spa Heater Replace 1 EA 8 1 $2,300 $2, Pool Equip. Area Pool Filter Replace 1 EA 15 4 $1,300 $1, Pool Equip. Area Spa Filter Replace 1 EA 15 1 $1,100 $1, Pool Area Surveillance System Replace 1 EA 12 1 $5,500 $5, UNIT BUILDINGS 35 Unit Buildings Flat Roofs Inspect, Repair, Recoat 48,800 SF 10 7 $56,120 $ Unit Buildings Flat Roofs Replace 48,800 SF $158,600 $ Unit Buildings Tile Roofs Refurbish 56,600 SF 35 5 $226,400 $ Buildings + Walls Stucco/Block Surfaces Repaint 126,600 SF 10 3 $94,950 $ Buildings Wood Surfaces Repaint 7,900 SF 4 0 $11,850 $ Buildings Wood Surfaces Partial Replace (Allowance) 7,900 SF 10 9 $8,295 $ Metal Railing Metal Surfaces Repaint 2,600 LF 5 1 $13,000 $ Metal Railing Metal Railing Partial Replace (Allowance) 2,600 LF 35 5 $9,100 $ Bldgs. 1, 2, 3, 6, 7 Hot Water Boilers Replace (Bldgs. 1, 2, 3, 6, 7) 5 EA 20 9 $21,000 $4, Bldgs. 4, 5, 8, 9 Hot Water Boilers Replace (Bldgs. 4, 5, 8, 9) 4 EA 20 1 $30,000 $7, Line items with have a remaining life of zero and are scheduled for replacement (2019) UOM = Unit of Measure EL = Estimated Useful Life RUL = Remaining Useful Life Capital Reserve Analysts, LLC 21

22 Table 5 Fully Funded Balance Calculations ITEM # RESERVE ASSET DESCRIPTION EL RL COST FFB RC CALCS COMMON AREA/GROUNDS 1 Asphalt Pavement Resurface (Mill & Overlay) 30 8 $266,200 $195,213 $8,873 2 Asphalt Pavement Seal Coat, Repairs 4 3 $11,979 $2,995 $2,995 3 Concrete Surfaces Repair/Replace (Allowance) 12 7 $2,500 $1,042 $208 4 Parking Awnings Repair/Replace (Allowance) $6,000 $1,333 $333 5 Carport Structures Repaint $12,500 $2,778 $694 6 Asphalt Pavement Resurface (Mill & Overlay) $7,000 $5,250 $175 7 Monument Sign Refurbish 20 4 $2,500 $2,000 $125 8 Mailbox Clusters Replace 30 4 $21,600 $18,720 $720 9 Pedestrian Bridges Replace $12,000 $9,000 $ Pedestrian Bridge Repair 20 9 $3,000 $1,650 $ Maintenance Golf Cart Replace 15 1 $4,000 $3,733 $ Erosion/Drainage Repairs (Allowance) $12,000 $3,333 $ Flat Roof Inspect, Repair, Recoat 10 7 $1,415 $424 $ Flat Roof Replace 25 9 $3,998 $2,558 $160 CLUBHOUSE/POOL 15 Flat Roof Inspect, Repair, Recoat 10 7 $1,495 $449 $ Flat Roof Replace $4,225 $2,253 $ Tile Roofs Refurbish 35 5 $4,400 $3,771 $ Clubhouse Flooring Resurface 18 9 $2,250 $1,125 $ Laundry Cabinetry Replace 20 1 $3,200 $3,040 $ Restroom Remodel 25 1 $3,000 $2,880 $ HVAC Unit Replace 15 4 $3,800 $2,787 $ Globe Lights Replace 30 3 $1,200 $1,080 $40 23 Pool Surface Resurface 12 5 $11,550 $6,738 $ Spa Surface Resurface 10 3 $3,600 $2,520 $ Pool "Kool" Deck Resurface 16 9 $11,600 $5,075 $ Pool "Kool" Deck Seal, Clean, Repair 4 0 $2,320 $2,320 $ Pool Cover Replace $1,000 $250 $50 28 Pool Furniture Replace (Lounges + Chairs) 8 4 $5,700 $2,850 $ Pool Heater Replace (A) 8 0 $2,500 $2,500 $ Pool Heater Replace (B) 8 3 $2,500 $1,563 $ Spa Heater Replace 8 1 $2,300 $2,013 $ Pool Filter Replace 15 4 $1,300 $953 $87 33 Spa Filter Replace 15 1 $1,100 $1,027 $73 34 Surveillance System Replace 12 1 $5,500 $5,042 $458 UNIT BUILDINGS 35 Flat Roofs Inspect, Repair, Recoat 10 7 $56,120 $16,836 $5, Flat Roofs Replace $158,600 $84,587 $5, Tile Roofs Refurbish 35 5 $226,400 $194,057 $6,469 Capital Reserve Analysts, LLC 22

23 ITEM # RESERVE ASSET DESCRIPTION EL RL COST FFB RC CALCS 38 Stucco/Block Surfaces Repaint 10 3 $94,950 $66,465 $9, Wood Surfaces Repaint 4 0 $11,850 $11,850 $2, Wood Surfaces Partial Replace (Allowance) 10 9 $8,295 $830 $ Metal Surfaces Repaint 5 1 $13,000 $10,400 $2, Metal Railing Partial Replace (Allowance) 35 5 $9,100 $7,800 $ Hot Water Boilers Replace (Bldgs. 1, 2, 3, 6, 7) 20 9 $21,000 $11,550 $1, Hot Water Boilers Replace (Bldgs. 4, 5, 8, 9) 20 1 $30,000 $28,500 $1, Total Components $1,070,546 $733,139 $57,908 Capital Reserve Analysts, LLC 23

24 Table 6 Projected Reserve Expenses ( ) Item # Reserve Asset COMMON AREA/GROUNDS 1 Asphalt Pavement Resurface (Mill & Overlay) $0 $0 $0 $0 $0 $0 $0 $0 $337,214 $0 2 Asphalt Pavement Seal Coat, Repairs $0 $0 $0 $13,090 $0 $0 $0 $0 $0 $15,630 3 Concrete Surfaces Repair/Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $3,075 $0 $0 4 Parking Awnings Repair/Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 5 Carport Structures Repaint $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 6 Asphalt Pavement Resurface (Mill & Overlay) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 7 Monument Sign Refurbish $0 $0 $0 $0 $2,814 $0 $0 $0 $0 $0 8 Mailbox Clusters Replace $0 $0 $0 $0 $24,311 $0 $0 $0 $0 $0 9 Pedestrian Bridges Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 10 Pedestrian Bridge Repair $0 $0 $0 $0 $0 $0 $0 $0 $0 $3, Maintenance Golf Cart Replace $0 $4,120 $0 $0 $0 $0 $0 $0 $0 $0 12 Erosion/Drainage Repairs (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 13 Flat Roof Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $1,740 $0 $0 14 Flat Roof Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $5,216 CLUBHOUSE/POOL 15 Flat Roof Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $1,839 $0 $0 16 Flat Roof Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 17 Tile Roofs Refurbish $0 $0 $0 $0 $0 $5,101 $0 $0 $0 $0 18 Clubhouse Flooring Resurface $0 $0 $0 $0 $0 $0 $0 $0 $0 $2, Laundry Cabinetry Replace $0 $3,296 $0 $0 $0 $0 $0 $0 $0 $0 20 Restroom Remodel $0 $3,090 $0 $0 $0 $0 $0 $0 $0 $0 21 HVAC Unit Replace $0 $0 $0 $0 $4,277 $0 $0 $0 $0 $0 22 Globe Lights Replace $0 $0 $0 $1,311 $0 $0 $0 $0 $0 $0 23 Pool Surface Resurface $0 $0 $0 $0 $0 $13,390 $0 $0 $0 $0 24 Spa Surface Resurface $0 $0 $0 $3,934 $0 $0 $0 $0 $0 $0 25 Pool "Kool" Deck Resurface $0 $0 $0 $0 $0 $0 $0 $0 $0 $15, Pool "Kool" Deck Seal, Clean, Repair $2,320 $0 $0 $0 $2,611 $0 $0 $0 $2,939 $0 Capital Reserve Analysts, LLC 24

25 Item # Reserve Asset Pool Cover Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 28 Pool Furniture Replace (Lounges + Chairs) $0 $0 $0 $0 $6,415 $0 $0 $0 $0 $0 29 Pool Heater Replace (A) $2,500 $0 $0 $0 $0 $0 $0 $0 $3,167 $0 30 Pool Heater Replace (B) $0 $0 $0 $2,732 $0 $0 $0 $0 $0 $0 31 Spa Heater Replace $0 $2,369 $0 $0 $0 $0 $0 $0 $0 $3, Pool Filter Replace $0 $0 $0 $0 $1,463 $0 $0 $0 $0 $0 33 Spa Filter Replace $0 $1,133 $0 $0 $0 $0 $0 $0 $0 $0 34 Surveillance System Replace $0 $5,665 $0 $0 $0 $0 $0 $0 $0 $0 UNIT BUILDINGS 35 Flat Roofs Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $69,021 $0 $0 36 Flat Roofs Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 37 Tile Roofs Refurbish $0 $0 $0 $0 $0 $262,460 $0 $0 $0 $0 38 Stucco/Block Surfaces Repaint $0 $0 $0 $103,754 $0 $0 $0 $0 $0 $0 39 Wood Surfaces Repaint $11,850 $0 $0 $0 $13,337 $0 $0 $0 $15,011 $0 40 Wood Surfaces Partial Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $10, Metal Surfaces Repaint $0 $13,390 $0 $0 $0 $0 $15,523 $0 $0 $0 42 Metal Railing Partial Replace (Allowance) $0 $0 $0 $0 $0 $10,549 $0 $0 $0 $0 43 Hot Water Boilers Replace (Bldgs. 1, 2, 3, 6, 7) $0 $0 $0 $0 $0 $0 $0 $0 $0 $27, Hot Water Boilers Replace (Bldgs. 4, 5, 8, 9) $0 $30,900 $0 $0 $0 $0 $0 $0 $0 $0 44 Total Expenses $16,670 $63,963 $0 $124,821 $55,229 $291,499 $15,523 $75,674 $358,331 $84,055 Capital Reserve Analysts, LLC 25

26 Table 7 Projected Reserve Expenses ( ) Item # Reserve Asset COMMON AREA/GROUNDS 1 Asphalt Pavement Resurface (Mill & Overlay) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 2 Asphalt Pavement Seal Coat, Repairs $0 $0 $0 $17,592 $0 $0 $0 $19,799 $0 $0 3 Concrete Surfaces Repair/Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,384 4 Parking Awnings Repair/Replace (Allowance) $0 $0 $0 $0 $9,076 $0 $0 $0 $0 $0 5 Carport Structures Repaint $0 $0 $0 $0 $18,907 $0 $0 $0 $0 $0 6 Asphalt Pavement Resurface (Mill & Overlay) $9,407 $0 $0 $0 $0 $0 $0 $0 $0 $0 7 Monument Sign Refurbish $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 8 Mailbox Clusters Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 9 Pedestrian Bridges Replace $16,127 $0 $0 $0 $0 $0 $0 $0 $0 $0 10 Pedestrian Bridge Repair $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 11 Maintenance Golf Cart Replace $0 $0 $0 $0 $0 $0 $6,419 $0 $0 $0 12 Erosion/Drainage Repairs (Allowance) $0 $0 $0 $17,622 $0 $0 $0 $0 $0 $0 13 Flat Roof Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $2,338 $0 $0 14 Flat Roof Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 CLUBHOUSE/POOL 15 Flat Roof Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $2,471 $0 $0 16 Flat Roof Replace $0 $0 $0 $0 $6,391 $0 $0 $0 $0 $0 17 Tile Roofs Refurbish $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 18 Clubhouse Flooring Resurface $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 19 Laundry Cabinetry Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 20 Restroom Remodel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 21 HVAC Unit Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $6, Globe Lights Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 23 Pool Surface Resurface $0 $0 $0 $0 $0 $0 $0 $19,090 $0 $0 24 Spa Surface Resurface $0 $0 $0 $5,287 $0 $0 $0 $0 $0 $0 25 Pool "Kool" Deck Resurface $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 26 Pool "Kool" Deck Seal, Clean, Repair $0 $0 $3,308 $0 $0 $0 $3,723 $0 $0 $0 27 Pool Cover Replace $0 $0 $0 $0 $0 $1,558 $0 $0 $0 $0 Capital Reserve Analysts, LLC 26

27 Item # Reserve Asset Pool Furniture Replace (Lounges + Chairs) $0 $0 $8,127 $0 $0 $0 $0 $0 $0 $0 29 Pool Heater Replace (A) $0 $0 $0 $0 $0 $0 $4,012 $0 $0 $0 30 Pool Heater Replace (B) $0 $3,461 $0 $0 $0 $0 $0 $0 $0 $4, Spa Heater Replace $0 $0 $0 $0 $0 $0 $0 $3,802 $0 $0 32 Pool Filter Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $2, Spa Filter Replace $0 $0 $0 $0 $0 $0 $1,765 $0 $0 $0 34 Surveillance System Replace $0 $0 $0 $8,077 $0 $0 $0 $0 $0 $0 UNIT BUILDINGS 35 Flat Roofs Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $92,758 $0 $0 36 Flat Roofs Replace $0 $0 $0 $0 $239,897 $0 $0 $0 $0 $0 37 Tile Roofs Refurbish $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 38 Stucco/Block Surfaces Repaint $0 $0 $0 $139,437 $0 $0 $0 $0 $0 $0 39 Wood Surfaces Repaint $0 $0 $16,895 $0 $0 $0 $19,016 $0 $0 $0 40 Wood Surfaces Partial Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $14, Metal Surfaces Repaint $0 $17,995 $0 $0 $0 $0 $20,861 $0 $0 $0 42 Metal Railing Partial Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 43 Hot Water Boilers Replace (Bldgs. 1, 2, 3, 6, 7) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 44 Hot Water Boilers Replace (Bldgs. 4, 5, 8, 9) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 44 Total Expenses $25,534 $21,456 $28,330 $188,015 $274,270 $1,558 $55,796 $140,258 $0 $32,256 Capital Reserve Analysts, LLC 27

28 Table 8 Projected Reserve Expenses ( ) Item # Reserve Asset COMMON AREA/GROUNDS 1 Asphalt Pavement Resurface (Mill & Overlay) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 2 Asphalt Pavement Seal Coat, Repairs $0 $22,284 $0 $0 $0 $25,081 $0 $0 $0 $28,229 3 Concrete Surfaces Repair/Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4 Parking Awnings Repair/Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 5 Carport Structures Repaint $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 6 Asphalt Pavement Resurface (Mill & Overlay) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 7 Monument Sign Refurbish $0 $0 $0 $0 $5,082 $0 $0 $0 $0 $0 8 Mailbox Clusters Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 9 Pedestrian Bridges Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 10 Pedestrian Bridge Repair $0 $0 $0 $0 $0 $0 $0 $0 $0 $7, Maintenance Golf Cart Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 12 Erosion/Drainage Repairs (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 13 Flat Roof Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $3,142 $0 $0 14 Flat Roof Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 CLUBHOUSE/POOL 15 Flat Roof Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $3,321 $0 $0 16 Flat Roof Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 17 Tile Roofs Refurbish $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 18 Clubhouse Flooring Resurface $0 $0 $0 $0 $0 $0 $0 $4,998 $0 $0 19 Laundry Cabinetry Replace $0 $5,953 $0 $0 $0 $0 $0 $0 $0 $0 20 Restroom Remodel $0 $0 $0 $0 $0 $0 $6,470 $0 $0 $0 21 HVAC Unit Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 22 Globe Lights Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 23 Pool Surface Resurface $0 $0 $0 $0 $0 $0 $0 $0 $0 $27, Spa Surface Resurface $0 $0 $0 $7,105 $0 $0 $0 $0 $0 $0 25 Pool "Kool" Deck Resurface $0 $0 $0 $0 $0 $24,288 $0 $0 $0 $0 26 Pool "Kool" Deck Seal, Clean, Repair $4,190 $0 $0 $0 $4,716 $0 $0 $0 $5,308 $0 27 Pool Cover Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Capital Reserve Analysts, LLC 28

29 Item # Reserve Asset Pool Furniture Replace (Lounges + Chairs) $10,295 $0 $0 $0 $0 $0 $0 $0 $13,041 $0 29 Pool Heater Replace (A) $0 $0 $0 $0 $5,082 $0 $0 $0 $0 $0 30 Pool Heater Replace (B) $0 $0 $0 $0 $0 $0 $0 $5,553 $0 $0 31 Spa Heater Replace $0 $0 $0 $0 $0 $4,816 $0 $0 $0 $0 32 Pool Filter Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 33 Spa Filter Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 34 Surveillance System Replace $0 $0 $0 $0 $0 $11,516 $0 $0 $0 $0 UNIT BUILDINGS 35 Flat Roofs Inspect, Repair, Recoat $0 $0 $0 $0 $0 $0 $0 $124,659 $0 $0 36 Flat Roofs Replace $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 37 Tile Roofs Refurbish $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 38 Stucco/Block Surfaces Repaint $0 $0 $0 $187,392 $0 $0 $0 $0 $0 $0 39 Wood Surfaces Repaint $21,402 $0 $0 $0 $24,089 $0 $0 $0 $27,112 $0 40 Wood Surfaces Partial Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $19, Metal Surfaces Repaint $0 $24,184 $0 $0 $0 $0 $28,036 $0 $0 $0 42 Metal Railing Partial Replace (Allowance) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 43 Hot Water Boilers Replace (Bldgs. 1, 2, 3, 6, 7) $0 $0 $0 $0 $0 $0 $0 $0 $0 $49, Hot Water Boilers Replace (Bldgs. 4, 5, 8, 9) $0 $55,809 $0 $0 $0 $0 $0 $0 $0 $0 44 Total Expenses $35,887 $108,230 $0 $194,497 $38,969 $65,701 $34,505 $141,673 $45,461 $131,553 Capital Reserve Analysts, LLC 29

30 Supplemental Disclosures General: CRA has no other involvement(s) with Quail Creek HOA which could result in actual or perceived conflicts of interest. Physical Analysis: Capital Reserve Analysts did conduct a physical inspection. Completeness: CRA has found no material issues which, if not disclosed, would cause a distortion of the Association's situation. Reliance on Client Data: Information provided by the official representative of the client regarding financial, physical, quantity, or historical issues will be deemed reliable by CRA. Scope: This is a reflection of information provided to CRA and assembled for the client's use, not for the purpose of performing an audit, quality/forensic analysis, health and safety inspection, or background checks of historical records. Reserve Balance: The actual beginning reserve fund balance in this is based upon information provided and was not audited. Reserve Projects: Information provided about reserve projects will be considered reliable. Any on site inspection should not be considered a project audit, quality inspection, or health and safety review. Capital Reserve Analysts, LLC 30

31 Definitions CASH FLOW METHOD: A method of developing a Reserve Funding Plan where contributions to the Reserve fund are designed to offset the variable annual expenditures from the Reserve fund. Different Reserve Funding Plans are tested against the anticipated schedule of Reserve expenses until the desired Funding Goal is achieved. COMPONENT: The individual line items in the developed or updated in the Physical Analysis. These elements form the building blocks for the. Components typically are: 1) Association responsibility, 2) with limited Useful Life expectancies, 3) predictable Remaining Useful Life expectancies, 4) above a minimum threshold cost, and 5) as required by local codes. COMPONENT INVENTORY: The task of selecting and quantifying Reserve Components. This task can be accomplished through on site visual observations, review of association design and organizational documents, a review of established association precedents, and discussion with appropriate association representative(s) of the association or cooperative. COMPONENT METHOD: A method of developing a Reserve Funding Plan where the total contribution is based on the sum of contributions for individual components. See Cash Flow Method. CONDITION ASSESSMENT: The task of evaluating the current condition of the component based on observed or reported characteristics. CURRENT REPLACEMENT COST: See Replacement Cost. DEFICIT: An actual (or projected) Reserve Balance less than the Fully Funded Balance. The opposite would be a Surplus. EFFECTIVE AGE: The difference between Useful Life and Remaining Useful Life. Not always equivalent to chronological age, since some components age irregularly. Used primarily in computations. FINANCIAL ANALYSIS: The portion of a where current status of the Reserves (measured as cash or Percent Funded) and a recommended Reserve contribution rate (Reserve Funding Plan) are derived, and the projected Reserve income and expense over time is presented. The Financial Analysis is one of the two parts of a. FULLY FUNDED: 100% Funded. When the actual (or projected) Reserve balance is equal to the Fully Funded Balance. FULLY FUNDED BALANCE (FFB): Total Accrued Depreciation. An indicator against which Actual (or projected) Reserve balance can be compared. The Reserve balance that is in direct proportion to the fraction of life used up of the current Repair or Replacement cost. This number is calculated for each component, then summed together for an association total. Two formulae can be utilized, depending Capital Reserve Analysts, LLC 31

32 on the provider s sensitivity to interest and inflation effects. Note: Both yield identical results when interest and inflation are equivalent. FFB = Current Cost X Effective Age / Useful Life Or FFB = (Current Cost X Effective Age / Useful Life) + [(Current Cost X Effective Age /Useful Life) / (1 + Interest Rate) ^ Remaining Life] [(Current Cost X Effective Age /Useful Life) / (1 + Inflation Rate) ^ Remaining Life] FUND STATUS: The status of the reserve fund as compared to an established benchmark such as percent funding. FUNDING GOALS: Independent of methodology utilized, the following represent the basic categories of Funding Plan goals: Baseline Funding: Establishing a Reserve funding goal of keeping the Reserve cash balance above zero. Full Funding: Setting a Reserve funding goal of attaining and maintaining Reserves at or near 100% funded. Statutory Funding: Establishing a Reserve funding goal of setting aside the specific minimum amount of Reserves required by local statues. Threshold Funding: Establishing a Reserve funding goal of keeping the Reserve balance above a specified dollar or Percent Funded amount. Depending on the threshold, this may be more or less conservative than Fully Funding. FUNDING PLAN: An association s plan to provide income to a Reserve fund to offset anticipated expenditures from that fund. Funding Principles: Sufficient Funds When Required Stable Contribution Rate over the Years Evenly Distributed Contributions over the Years Fiscally Responsible LIFE AND VALUATION ESTIMATES: The task of estimating Useful Life, Remaining Useful Life, and Repair or Replacement Costs for the Reserve components. PERCENT FUNDED: The ratio, at a particular point of time (typically the beginning of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. PHYSICAL ANALYSIS: The portion of the where the Component Inventory, Condition Assessment, and Life and Valuation Estimate tasks are performed. This represents one of the two parts Capital Reserve Analysts, LLC 32